A number of 2010 gubernatorial candidates propose to reduce or eliminate their state’s corporate income tax, saying this will stimulate growth and create jobs. But, while states are understandably eager to get their economies moving again, corporate tax cuts will not likely work. Among the most important reasons why:
The one recent example of a state eliminating its corporate income tax is Ohio, which phased out its tax from 2005 to 2009. Despite a more than $1 billion annual reduction in business taxes, Ohio’s shares of national income, employment, and investment have all fallen since 2005.